QUALCOMM LAPPING RIVALS IN NEW 4G MOBILE TECHNOLOGY

When you see people hunched over their smartphones reading emails, checking bank accounts, downloading apps or posting a picture to social media sites, there’s a good chance they’re using Qualcomm’s technology.

Much of the wireless know-how that allows people to be constantly connected to the Internet was pioneered by the San Diego company. When high-speed 3G networks spread around the globe, the company’s radio expertise and technology patents turned it into a mobile powerhouse.

With the major wireless companies competing over who could offer the biggest, fastest 4G network, the question in the industry became whether Qualcomm’s 3G-based advantage would fade as 4G technology emerged.

So far, the answer is no.

Qualcomm has taken an early, dominant market lead in the new 4G technology called Long Term Evolution, or LTE. Analysts estimate that Qualcomm currently has about 85 percent market share for 4G radio chips used in smartphones and tablets. Its wireless modems are in most of today’s top-selling mobile devices, including Apple’s iPhone 5, Samsung’s Galaxy S4 and the HTC One, among others.

Black magic of wireless

And LTE is forecast to grow fast over the next five years worldwide. ABI Research predicts 245 million 4G LTE mobile devices will ship in 2013, growing to 967 million gadgets by 2018.

Qualcomm’s pole position in the LTE radio race surprises some industry analysts, who thought competitors would move faster. It highlights how tricky LTE can be for chip makers, and how much companies need to invest in research and development to pull it off.

“They are just always able to produce a working product before anybody else,” said Will Strauss, president of Phoenix-based industry research firm Forward Concepts. “They pour a high percentage of money into R&D that enables them to stay ahead. In some ways they don’t have to perfect it and be the best there is, because there is nobody else there.”

The story of how Qualcomm jumped ahead in 4G starts by understanding the company’s core strength.

While Qualcomm often makes headlines for such things as its Snapdragon application processors or for sponsoring the $10 million Tricorder X-Prize, the company stands out most in radios — called mobile station modems. These chips are the black magic of wireless. They deliver voice and data over increasingly crowded airwaves, penetrating buildings and sidestepping interference so smartphone owners can receive email and watch video on the go.

Qualcomm began spending big dollars on 4G LTE radios early on, and it took some heat for it. In early 2009, a group of investors met with Qualcomm executives to ask tough questions. Competitors seemed to be closing the gap in 3G technology and were using price to chisel away Qualcomm customers. Meanwhile, the company was spending 40 percent of its research and development budget, which totaled $2.4 billion that year, on projects that wouldn’t be generating revenue in the near term.